CRSP Contract Issues
The original contract allocation of power with the Western Area Power Administration expired on September 1, 1989. As Western developed criteria for marketing power after 1989 (Post-89 Marketing Criteria), they solicited applications from entities interested in receiving an allocation of CRSP power. By law, this power is allocated first to preference customers (i.e., municipal and REA entities) within the marketing area and then to other entities.
The power systems throughout the western United States are all interconnected and thus operate as one large integrated system. Electricity is the ultimate in “just in time” delivery, but this delivery creates a problem because large quantities of electricity cannot be stored for later use. Any time the load increases or decreases, a regulating generator must sense that change and immediately respond appropriately. The system has been designed to allow certain units to be “base” loaded, while a few of the units are allowed to “follow load” or regulate. This system has provided a very stable and reliable electric system. To enable reliable moment-by-moment system control, it is necessary to have contractual arrangements to address how the various entities will interrelate and account for the power and energy. These contractual arrangements can be very complex, but they provide a means of reconciling the system after the fact. Therefore, contractual arrangements may not necessarily follow the actual operation on a moment-by-moment basis, but the contracts allow the entities to operate within agreed upon guidelines so business can continue.
Hydro projects are ideal for “following load” and meeting peak demand because they can be easily and quickly adjusted to meet changing load. The federal hydro system historically has been used to follow the load within the region, while the larger, less flexible coal-fired plants provide the base load requirements. It has also been possible for the output of the hydro projects to be reduced to a minimum later at night to “save” the water in the reservoir for use in the following daytime when peak loads require it. This integration of hydro and thermal resources provides the most efficient operation of the electric power system. From a contractual standpoint, however, Western requires customers to take at least 35% of their allocated power at all times in order to allow an optimization of the hydro resource. This has allowed Western to reduce its hydro resources to the minimum level in the middle of the night (when most users are asleep and industrial loads are low) and use thermal resources, and then increase the hydro generation in the daytime to provide the peaking requirement and defer the addition by the customer of additional peaking or less efficient coal-burning resources. If the hydro resource is constrained by maximum and minimum flow and ramp rate releases, this flexibility and diversity is reduced. This also reduces the value of the hydro power, necessitates additional coal-burning, possibly requires additional resources to be built, and raises the cost of replacement power.
The allocation of federal power from the Colorado River Storage Project remained the same from the time the projects were put into commercial operation until September 1, 1989. In 1979, WAPA began its process of determining the amount of capacity and energy it would have available after 1989 and the criteria by which it would be allocated to customers. This process resulted in the post-89 contracts with the associated allocation of power. The allocation to the then-existing customers was reduced in order to allow for adjustments in the marketable resource and the addition of new preference customers. Most of the customers had signed the post-89 contract before September 1, 1989, although Western was unable to sign the contracts because of the National Wildlife Federation et. al. lawsuit over the environmental assessment. Judge Greene ruled the marketable resource should remain the same as the pre-1989 quantities and Western needed to have the ability to adjust the quantities upon completion of the EIS or further order of the court. In September 1989, Western announced their intent to do an Environmental Impact Statement (EIS) on the Post-89 Marketing Criteria. The EIS was to cover all projects in the Salt Lake Integrated Projects (Colorado River Storage Project, participating projects, Collbran Project, and Rio Grande Project). The primary focus of the EIS was to determine the relationship between the amount of power available to be allocated to preference customers and the operation of the Integrated Projects.
In April 1998, the allocations were revised to reflect the changed operating conditions at Glen Canyon Dam. In late 1998, the Department of Energy (DOE) was asked to begin the process to extend the CRSP and Central Valley contracts beyond 2004. A public process was initiated which solicited input on the impacts of deregulation on preference power. Following this process, at the direction of newly appointed DOE Secretary Bill Richardson, a public process began to determine how much of the existing CRSP resource should be “set aside”, primarily for Native American allocations. In June, 1999, a Federal Register notice published indicating that in the post-2004 CRSP contracts would be reduced up to 7% to create a pool of power to be allocated to Native American and new customers. Western began the public process for new allocations during September, 1999 and has asked for applications for CRSP resource to be submitted in June of 2000. Final allocations were published, including allocations for approximately 53 tribes. The new long-term power contracts for all CRSP customers took effect October 1, 2004 (20-year contracts).
